The price of a movie ticket was increased by 18°. The increase in ticket price reduced the number of audience by 25%. What is the effect on revenue?
Show answer & explanation
Correct answer: D
Explanation
The correct answer is option 4 i.e. decrease by 11.5%.
the original price of a movie ticket = P
the original number of audience = A
Original Revenue = P × A
The ticket price increases by 18%,
so the new ticket price = P × (1 + 18/100) = P × 1.18
The number of audience decreases by 25%,
so the new number of audience = A × (1 − 25/100) = A × 0.75
New Revenue = New Ticket Price × New Audience
⇒ New Revenue = (P × 1.18) × (A × 0.75) = P × A × 1.18 × 0.75
⇒ New Revenue = P × A × 0.885
The original revenue was P × A and the new revenue is 0.885 × (Original Revenue).
Hence the new revenue is 88.5%
Percentage Change in Revenue = (0.885 − 1) × 100 = −11.5%